Following an announcement that it had unloaded its CMS Viron Energy Services to Chevron Energy Solutions, CMS Energy reported late Wednesday that it had also completed the sale of its CMS Field Services subsidiary to Cantera Natural Gas Inc. On Thursday, the company announced that it has entered into an agreement to sell its Australian Loy Yang plant.

CMS said the proceeds from the Field Services sale were approximately $112.6 million in cash and a $50 million face-value note, which is payable from 2005 through 2009 contingent on the financial performance of the Fort Union and Bighorn natural gas gathering systems in Wyoming. Like the proceeds it received from the Viron sale, CMS said all proceeds from the field services sale will be used to reduce debt.

CMS Field Services provides gathering, compression, treating and processing services for natural gas and natural gas liquids. It has facilities in Oklahoma, Texas, Louisiana, and Wyoming. The purchaser, Cantera Natural Gas, is a Morgan Stanley Capital Partners portfolio company.

“The sale of CMS Field Services and other non-core assets helps us reduce debt and strengthen liquidity,” said CMS CEO Ken Whipple. “The goal of our back-to-basics strategy is to be a smaller, stronger company with less business risk and more predictable earnings. The completion of the CMS Field Services sale boosts our efforts to increase our financial flexibility and focus on our core businesses.”

In a separate transaction, Chevron Energy Solutions, a performance contracting subsidiary of ChevronTexaco, added the non-federal business portion of CMS Viron Energy Services to its growing energy engineering business, a move designed to bolster its presence in the education and state and local government markets, where CMS Viron has secured hundreds of contracts. The sale of Viron’s non-federal business came five months after CMS sold its federal government business to Pepco Energy Services.

“We look forward to offering Viron’s expertise to schools, colleges, universities, cities, counties, states and many other customers, while continuing to deliver effective energy solutions to federal agencies and commercial and industrial customers,” said Jim Davis, president of Chevron Energy Solutions. “The fact that Viron has continued to win new projects speaks to its reputation, and we plan to build on this through the financial strength, technology resources and energy experience of ChevronTexaco.”

In addition to the transaction, Chevron Energy Solutions confirmed that it has completed the transfer of contracts related to its purchase of the federal business of Planergy International, formerly known as Energy Masters International. As a result of that acquisition, which was announced in April 2002, Chevron said it has been designing and implementing energy efficiency projects and integrated information systems for the federal government, helping many federal installations to manage infrastructure requirements and comply with energy reduction mandates.

“With these two developments, Chevron Energy Solutions is well positioned to provide energy services to all institutional markets, in addition to commercial and industrial companies,” Davis said.

Through the two acquisitions, Chevron Energy Solutions said it has added about 180 energy professionals, expanding the company to approximately 300 employees. In addition, more than a dozen offices have been added, covering all major regions of the country.

CMS Viron is one of the oldest energy engineering firms specializing in performance contracting in the U.S. Founded in 1974, the company has grown its energy services business over three decades and pioneered performance contracting, which involves guaranteeing future energy and operational savings — typically 15 to 30% of a customer’s annual energy costs — through energy-efficient equipment upgrades, energy management solutions and other projects.

John Mahoney, formerly president of CMS Viron Energy Services, will now serve as COO for Chevron Energy Solutions’ expanded organization. “To become part of Chevron Energy Solutions’ organization and ChevronTexaco’s 100-plus-year history as a leader in energy, opens up a world of opportunities for our customers and our employees,” said Mahoney. “It’s a great fit with Viron’s capabilities.”

Whipple noted that the CMS Field Services sale and the $1.8 billion sale of the CMS Panhandle Companies in June keep the company on track to reach its goal of realizing about $900 million in net proceeds from asset sales this year and reducing its debt. Currently, CMS has completed or announced more than $3.8 billion in asset sales, including assumed debt, over the past 18 months. The company is in the process of selling additional non-core assets.

In yet another divestiture, CMS Energy said Thursday that it and its partners have reached a conditional agreement to sell the 2,000 MW Loy Yang power plant and adjacent coal mine in Australia to an international consortium for about $3.5 billion Australian (approximately $2.4 billion in U.S. dollars), including $165 million Australian for the project equity. CMS Energy owns 49.6% of the Loy Yang project. NRG Energy Inc. and Horizon Energy Australia Investments each own approximately a 25% share. Net proceeds to CMS Energy for its equity share are subject to closing adjustments and transaction costs.

The brown coal-fired plant is the largest generator in Victoria, Australia, accounting for about 24% of the state’s electricity generation. The CMS-led partnership bought the complex for $3.8 billion in 1997 as Australia privatized its electric industry.

The Great Energy Alliance Corporation (GEAC) was formed earlier this year by the Australian Gas Light Company (AGL), the Tokyo Electric Power Company, Inc. (TEPCO), and a group of financial investors led by the Commonwealth Bank of Australia to explore the possible acquisition of Loy Yang.

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